The Analysis of the Monetary Reform in Iran and the Requirements for its Success

Double-digit inflation has been one of the problems of Iran's economy in recent decades that policymakers have not been able to solve. The continuation of high inflation has raised the issue of reforming the national currency. The experiences of countries that have reformed their currencies show that this policy alone has little effect and its success requires other measures. In this paper, eight effective variables in controlling inflation are introduced as economic reforms and using sequential probit model, the effect of changes in these variables on inflation is measured. The sample used in the study includes 61 currency modifications by 48 countries in the period 1980-2018. The results of these estimates show that out of the eight proposed modifications used in the model, five of them have significant effects on inflation. In other words, countries that have implemented these five economic reforms before eliminating zero from their currency have been successful in implementing this policy. Another important consequence is the cessation of the effectiveness of these reforms in controlling inflation. The proposed package of articles obtained from the results of the estimates includes the independence of the central bank, the reduction of the government budget deficit, the reduction of market exchange rate fluctuations, the increase of the GDP growth rate, and the reduction of the net government debt to the banking system.